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31 March 2015
by John Passant

Of shit sandwiches, tax ‘reform’ and taxing the rich

On Monday morning, Joe Hockey, the Australian Treasurer, released Re:think, a tax discussion paper. It is no accident that he did so at the Australian Council of Social Services office. Let’s hope ACOSS don’t fall for the 3 card trick that is the tax discussion paper.

Given the widespread opposition to the 2014 Budget, the one percent have drawn an important lesson from that debacle – consult with the intended victims before launching attacks on poor people and workers. That is what the tax discussion paper is about. This Damascene conversion to talking to people begs the question – is a tax shit sandwich no longer a shit sandwich if it has consultation sprinkles on top? To ask the question is to answer it.

Re:think is aimed at generating tax outcomes that benefit the 1% under the guise of consultation with the 99%. There will be debate and discussion, but a narrowly focused debate and discussion within the tax parameters set by the one percent about tax efficiency and the like. This is code for further reducing tax equity and increasing tax burdens of the poor (e.g, the GST rate increase and base broadening) and the working class (through bracket creep).

Equity gets little mention in the paper and does not figure in the deliberations about suggested reforms. Thus there is for example almost no discussion about wealth taxes in the paper apart from a fleeting reference to estate duties. A wealth tax is a progressive tax that could be levied on the top twenty percent of wealth holders since they hold almost fifty percent of the wealth in Australia. Such an annual tax at one percent would yield on my back of the envelope calculations $30 billion and have little impact on business or investment.

In the paper there is lots of discussion about ‘tax system sustainability’ or similar. This is code for making working class taxpayers pay more tax or receive less social wage, or a combination of both.

For example the discussion paper suggests that technological and other changes threaten the Goods and Services Tax base. So it asks ‘To what extent are the tax settings (that is, the rate, base and administration) for the GST appropriate? What changes, if any, could be made to these settings to make a better tax system to deliver taxes that are lower, simpler, fairer?’

If we are having a truly national conversation then my answer would be abolish the GST and tax the rich on their wealth and their income, or, to use the language supposedly of a former right-wing UK Labor Chancellor, squeeze the rich until their pips squeak.

Piketty and others argue that growing inequality threatens social stability and abolishing regressive taxes and replacing them with more progressive ones addresses to some extent those concerns. However tax is a second order issue when it comes to inequality. The real reason for growing inequality is the lack of working class struggle over the last 3 decades. The share of national income going to labour is at near historic lows and that going to capital historic highs. The best response to that is to strike to win big real wage increases and to cut the working week to 30 hours.

Let’s be clear. We aren’t having a national tax conversation; we have been served a tax reform program that reflects the wider agenda of neoliberalism, first introduced into Australia by Labor in 1983, of shifting more and more wealth from workers and the poor to capital and the rich. Tax over that period of time in Australia has become less progressive, another indicator of the wealth shift to the rich and powerful.

Hockey will try to buy us off with promises of tax cuts if the GST is increased and/or its base broadened. Bracket creep will erode them just as it did the ‘compensatory’ tax cuts when the GST was introduced.

Company tax cuts mean that those many big businesses who are, according to the Tax Justice Network/United Voice report ‘Who pays for our common wealth?’ tax leaners, will get even more rewards. The paid poppinjays of the 1% argue that company tax cuts lead to more employment and higher wages. This assumes the extra profit in the hands of the bosses is reinvested in labour and more competitive pricing. In fact the general tendency of capital is to reinvest their profits in capital in the form of labour saving machinery, etc. Ireland has a company tax rate of 12.5%. That didn’t save it from the ravages of the global financial crisis. In fact it may have worsened the situation. Ireland’s unemployment rate in early 2012 was over 15 percent and would have been over 20% except for mass migration. A 12.5% company tax rate didn’t save it.

Despite the fact Joe Hockey has said nothing is off the table, there won’t be any discussion of a carbon tax or rent taxes. In fact the paper doesn’t mention environmental taxes on the big polluters at all or getting back any of the super profits (economic rents) the banks make and the mining companies used to make. The only real reference in the paper to them is the government bragging about their repeal. So too there will be no discussion of wealth taxes, of estate duties or of soaking the rich till their pips squeak. It will be a carefully stage managed consultation process within narrow limits.

Budget speculation has been on a tax of 0.05% on bank deposits up to $250,000. This is supposedly to help pay for the government guarantee on such deposits, a guarantee which assists the banks to raise money and which is unlikely to ever be used. Details are unclear and it wasn’t mentioned in the tax discussion paper, but if it goes ahead the banks will pass on the tax to customers. This will be a further tax on workers and the poor.

Another sleight of hand in the paper is to offer up for consideration a few sacrificial lambs like the massive benefits the tax system delivers to rich superannuants and rich will be superannuants. The paper also asks does the capital gains tax 50% exemption ‘and negative gearing influence savings and investment decisions, and if so, how?’ While addressing these legally sanctioned tax rorts is a step forward, the fact that they are discussion points to justify cuts to company tax rates and to increase the rate and broaden the base of the GST confirms this is tax discussion paper is a document of the rich, by the rich and for the rich.

The answer to the tax and budgetary dilemmas seems pretty clear. Tax the rich.